- The Washington Times - Saturday, March 8, 2008

A jobs report yesterday showed that employers nationwide slashed 85,000 jobs since the beginning of the year, in the clearest sign yet that the economy has entered or is verging on recession.

The news changed the political discourse, with President Bush urging confidence even as the White House acknowledged for the first time that the economy may be contracting rather than growing.

Bush’s top economic adviser, Edward Lazear, acknowledged yesterday that the economy may dip into negative territory in the current quarter, according to the Associated Press. Mr. Lazear’s comment was the most pessimistic assessment heard out of the administration. He would not discuss whether the White House believes the economy will actually fall into a recession, AP reported.

Cutbacks in nearly every industry caused people to drop out of the work force, sent consumer confidence plummeting and prompted the Federal Reserve to pump another $200 billion into credit markets to try to revive growth.

The job losses were heaviest in housing construction and manufacturing, where the cumulative effects of a two-year recession in housing have hit hardest. But retailers also cut 34,000 positions as consumers grew gun-shy about spending last month, and the weakness spread to one of the sturdiest sectors — professional and business services — which lost 20,000 jobs.

Health care, restaurants and state and local education were among the only sectors to post employment growth, according to the Labor Department report.

The dismal job outlook prompted nearly 500,000 people since December to give up looking for a job, drawing down the unemployment rate to 4.8 percent from 5 percent.

Economists said the two-month net loss of 85,000 jobs meets one of the most important requirements for declaring an official U.S. recession, which now appears to have started at the turn of the year. Harvard University economist Martin Feldstein, who heads up the National Bureau of Economic Research committee that makes the call on recession, has already indicated that December or January likely was the turning point.

“We expect the U.S. has entered its first recession in seven years,” said John Silvia, chief economist with Wachovia Securities, noting that virtually every sector of the economy has shown signs of contracting in the last two months. While the economy barely grew by 0.6 percent at the end of last year, he and most other economists expect it to post an outright decline in the first quarter.

Maddy Rogers, an unemployed medical receptionist who posted a plea for help this week on Monster.com, said she has grown frustrated searching for work in a market where jobs are disappearing by the day.

“I lost my job about four months ago and I’ve been unable to find a job ever since,” she said. “I’ve tried going for less-paying jobs and for jobs that I’m over qualified for. I have very good skills and I’m very reliable, dependable, and hard working. At this point I don’t know what to do.”

President Bush made a rare White House appearance to acknowledge the bad news and urge courage.

“Losing a job is painful and I know Americans are concerned about our economy, so am I,” he said, noting that the job slump is the reason he and Congress rushed to pass a $168 billion package of consumer and business tax cuts last month. Tax rebates of $600 to $1,800 will start being mailed out to households next month.

“I know this is a difficult time for our economy, but we recognized the problem early and we provided the economy with a booster shot,” the president said, urging people to quickly use their rebates to make purchases and “boost consumer spending.”

The timing of the tax cuts represents one of the best hopes that the recession will be short and shallow, economists say, because they are likely to affect the economy before the downturn becomes entrenched.

“The good news is that most of the bad news is out on the table,” said Alexander P. Paris, analyst at Barrington Research. The recession in housing and autos has been in progress since 2005, and the downturn in manufacturing and credit has been under way for months, so much of the worst damage may already be over, he said.

Meanwhile, the Fed’s deep interest rate cuts since January “should begin to have a positive effect on economic growth and be aided by fiscal stimulus,” he said.

Assuming the recession is short and mild as many economists predict, it may already be close to half over, he said.

Other analysts are not so sure that the Fed’s efforts will suffice to revive the economy. The Fed announced yesterday it will make an additional $200 billion in funds available to banks that are strapped for cash in coming months.

The stock and credit markets nevertheless continued to decline broadly yesterday, with the dollar posting new lows against major currencies and major stock indexes ending down 17 percent from their highs in the fall.

“Unfortunately, it may not be effective enough,” even if the Fed cuts interest rates by another half to three-quarters point this month, as many on Wall Street expect, said Bill Greiner, chief investment officer at UMB Asset Management.

The big loss of vital services jobs shown in yesterday’s report indicates “a broad-based and underlying weakness in the economy” that will be hard to reverse, he said, and even temporary jobs — a tool often used by businesses when they’re uncertain about the economy — have been declining for four months.


Nearly every major sector shed jobs last month, but those related to housing and consumer spending were hardest hit.

Manufacturing —52,000

Construction —39,000

Retail trade —34,000

Professional, business services —20,000

Education, health services +30,000

Leisure, hospitality +21,000

Government +38,000

Source: Labor Department



Click to Read More

Click to Hide